Osterix, a zinc-finger transcription factor, is specifically expressed in osteoblasts and osteocytes of all developing bones. Because no bone formation occurs in Osterix null mice, Osterix is thought to be an essential regulator of osteoblast differentiation. We report that bone morphogenetic protein-2 (BMP-2) induces an increase in Osterix expression, which is mediated through a homeodomain sequence located in the proximal region of the Osterix promoter. Our results demonstrate that induction of Dlx5 by BMP-2 mediates Osterix transcriptional activation. First, BMP-2 induction of Dlx5 precedes the induction of Osterix. Second, Dlx5 binds to the BMP-responsive homeodomain sequences both in vitro and in vivo. Third, Dlx5 overexpression and knock-down assays demonstrate its role in activating Osterix expression in response to BMP-2. Furthermore, we show that Dlx5 is a novel substrate for p38 MAPK in vitro and in vivo and that Ser-34 and Ser-217 are the sites phosphorylated by p38. Phosphorylation at Ser-34/217 increases the transactivation potential of Dlx5. Thus, we propose that BMP activates expression of Osterix through the induction of Dlx5 and its further transcriptional activation by p38-mediated phosphorylation.